3p Contributor: shutkin

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SoCap08 provided all sorts of reasons for optimism about capitalism as a force for social good. A new breed of entrepreneurs is busting through old mental models and market forces to drive results based on the new metric called the triple-bottom line. My take-away from SoCap08 was the realization that, as essential as the private market is in producing large-scale change, the public sector – government – is just as vital, for at least a couple of reasons. First, the emerging social capital/triple bottom line marketplace is tiny, a couple of trillion dollars in the 60+ trillion dollar global marketplace. Only governments, in the U.S., European nations and other states, have the cash and policy resources at hand to multiply private sector investment rapidly and at a significant scale. It’s simple: when people begin to act collectively to match their voting and policy choices with their social vision, change will follow. At scale. The New Deal, the Marshall Plan, the G.I. Bill, the Interstate Highway System and the Civil Rights Act of 1964 come to mind.

It’s as simple as the name of the company’s diminutive, inexpensive yet iconic product, the Civic. Honda Motor Company has built a world-beating business rooted in a straightforward social commitment. As Tetsuo Iwamura, president of Honda North America puts it, “. . . We want to make Honda the company that society wants to exist.” As the Big Three U.S. automakers and even its arch-rival Toyota stumble in the face of dwindling demand for SUVs and trucks due to rising oil prices, Honda’s performance has held steady, with sales up 3 percent so far in 2008 while the market as a whole has fallen 11 percent. Honda has consistently resisted the rush to build bigger, heavier cars and trucks, even during the giddy 1990s, when SUVs became all the rage. The reason? Honda’s always seen its advantage as fuel efficiency and environmental performance, with the motto, “Blue skies for our children,” dating back to the 1970s. Any approach that veers away from this credo is avoided. For the past 15 years, Honda has had the highest corporate average fuel economy, and counting. The best engines, the best fuel-efficiency, the best design, all at competitive prices, for nearly half a century. That’s a company society not only wants, it needs.

If you’re trying to find the fastest route from Point A to Point B, would you choose a straight line or a zig zag? In the case of carbon reductions and climate change, it seems we’re choosing the latter. Carbon markets, a k a cap-and-trade, are a zig zag approach to reducing carbon emissions. They’re complex, dynamic and susceptible to corruption and gaming. The European Union, with its 3-year old carbon market, has seen carbon emissions rise, not fall, during this period, 0.4 percent in 2006 over the previous year and 0.7 percent in 2007. The reason? As human systems, carbon markets are subject to the same pitfalls and vagaries as any other human institution, perhaps even more so since the stakes are so high. In Europe, regulators have been heavily influenced by the 12,000 companies in the market vying for easy pollution permits. Too many permits were initially issued, making the price of carbon low and providing little incentive for polluters to reduce their emissions. Britain’s cement industry saw carbon emissions increase by 50 percent in the last 3 years. The simplest, best approach to reducing carbon emission is a carbon tax, whether in Europe or here in the U.S., which is inching toward a cap-and-trade approach. A carbon tax is the straight line. Put a price tag on carbon, apply it across the board and let the price signals do their thing. But to get there, we need leadership, from politicians, CEOs and citizens alike. That’s the tougher row to hoe, the real zig zag.

In Cambridge, MA, where I used to live, bike ridership is at record numbers, and growing. Up 70 percent in the last 5 years. Bike businesses in the area are booming. Thank you, $4/gallon gas. We in the sustainability movement often talk about sustainability’s “3 Legged Stool”–the social, economic and environmental goals that go hand in hand, are inextricably linked. If you have one but not the others, the thing eventually topples over. Cambridge’s bike story is similar to Portland, Oregon’s, whose robust bicycle culture and the economy it supports give us another sustainability metaphor, this one with two-wheels. What started as a group of Portland cyclists committed to the environment and public health has morphed into something more interesting and powerful: a small but stout industry, with the jobs, tax dollars and storefronts to prove it, supporting and inspired by the city’s cyclists. It’s a great example of sustainability-in-motion, of social, economic and ecological values each supporting the other and revolving, like the wheels of my old Trek 950 mountain bike (equipped with beefy street tires for my former Cambridge, MA commute), in a positive, virtuous, dare I say it, cycle.

Build it well, and smart, and they will come. That’s a big part of the lesson from Seabrook, Washington, where a young developer named Casey Roloff has brought his New Urbanist approach to the state’s northern coastline. For decades, coastal development has failed in this part of the state, with nothing more than seedy resorts and strip malls to show for it. Meantime, the area’s logging and fishing industries have been on the steep decline for a while, with the unemployment rate currently at 7 percent. Roloff’s plan was simple: construct quality buildings with good design, including porches and gabled roofs; make the streets walkable and bikable within a compact downtown area; create trails and easy ocean access; throw in a boutique hotel and organic community garden. Just the kind of place most people want to live in, and vacation in. While not perfect by any stretch – all development has costs, in Seabrook’s case the threat of gentrification and environmental impacts on water and sewer systems among them – the shift to an amenity-based economy, with construction jobs, tourism and a commitment to conservation, is a wave Roloff’s intent to ride all the way to bank. And at 36, he’s got plenty of time for surfing.

I have to believe that somewhere between living off-the-grid in a cabin in Vermont a la Henry David and hopping in a private jet between palaces in Manhattan and Monaco is something approaching a middle, sustainable ground for the American lifestyle. As a culture, we seem to suffer at times from what I would call a kind of Consumption Bi-Polar Disorder. We either want next to nothing or everything all the time. The Voluntary Simplicity movement is a case of the former. Today’s Wall Street the latter. But neither, I would argue, is an exemplary path. Three hundred million people can’t live like Thoreau; that’s why we created cities and suburbs, to say nothing of electric grids – efficiency has its virtues. Likewise, the billionaires of the Blackstone Group and capitalist icons like Donald Trump are not the kind of role models that lend themselves to scaling. Imagine tens of millions of Mar-a-Lago’s spread across the landscape. Doesn’t work. If nothing else, the TBL credo is about balance, about finding the sweet spot between too much and too little. Something like the ideal of The American Middle Class. But as we’ve seen in recent decades, it’s getting harder to maintain the middle; the pull of the poles, the Haves and Have-Nots, seems to be getting stronger. But it shouldn’t be rocket science, achieving the balance. Livable wages, affordable health care and housing, quality public education, clean air and water. Pretty basic stuff. TBL stuff. You shouldn’t have to live in a tent or the Taj Mahal to feel like you’ve got it. A pioneer in social entrepreneurship and sustainability, William Shutkin is the inaugural Chair in Sustainable Development at the Leeds School of Business at the University of Colorado Boulder. He also serves as the Interim Executive Director of the Business Alliance for Local Living Economies, a Partner of the Innovation Network for Communities and a Research Affiliate at MIT. In his spare time, he enjoys hanging out with his wife and two kids tele-skiing, flyfishing and gazing at trees.

Real estate development, like every other part of the U.S. economy, is starting to change, to adapt to a new, emergent order we call “sustainable.” A good example is Green Coast Enterprises, a start-up development company whose mission is, appropriately, about adaptation. Green Coast was founded by a former MIT student of mine, Will Bradshaw, and his lawyer colleague Reuben Teague (Disclosure: I’m on Green Coast’s Advisory Board). Together, they’ve got an interesting mix of skills — planning law, design and construction — and interests — social justice, climate change, community development, entrepreneurship. What Will and Reuben are doing is essentially refashioning real estate and community development as something new, what they call “community resilience,” a species of sustainability linking social, environmental and economic issues in one business model grounded in one development vision — resilient communities whose people, buildings and economies can adapt to and withstand natural disasters and social challenges of all sorts in the Post-Katrina, Climate Change Age. And what better place to rebuild a city by reimagining an industry than New Orleans, a place where nature, class, race and commerce have always mingled in innovative, if idiosyncratic, ways, a few feet below sea level.

I’m as jaded as the next guy when it comes to companies touting their green chops but, on closer inspection, having little to back it up. But amidst the greenwashing/hyping of recent years, I’ve also been downright moved. If you think about, outdoor retailers are, or should be, leaders in the green/sustainable business community. Environmental quality is, after all, a key piece of their value proposition, as in, “Those hiking boots you just bought are not recommended for Superfund sites.” Or melting glaciers, for that matter. Sure, Patagonia comes to mind as a pioneer. But I’m also thinking of Keen, the outdoor shoe company whose “Hybrid Life/STAND” campaign is both a powerful statement about the connection between creativity, athleticism and activism and an awards program for people who are living it. Then there’s Eastern Mountain Sports. I know next to nothing about EMS’s CSR record but I have to admit I was impressed when I recently bought a pair of quarter-length running socks. On the back of the package were two words, “Future Consciousness.” Wow! One pair of socks and then, like that, transcendence. Like Keen’s Hybrid Life concept, Future Consciousness, according to EMS, is all about owing up to our shared fate and the deep connections between consumer and consumed, people and planet, socks and species.

The buyout firm Kohlberg Kravis Roberts last week announced a new partnership with Environmental Defense to help measure the environmental performance of the dozens of businesses KKR owns, from Toys R Us to the energy giant TXU. The partnership grows out of the collaboration between the two groups last year in brokering a deal for TXU. ED agreed to support the acquisition by KKR of TXU in exchange for KKR and its partner, Texas Pacific Group, agreeing to reduce TXU’s carbon emissions and scotch its plans to build new coal-burning power plants. The evolution of the KKR-ED partnership mirrors a larger evolution underway for the past two decades in American environmentalism: the merger of market and environmental strategies. ED’s President, Fred Krupp, has long been out front in pushing for what he and others have called “The Third Wave” of environmentalism, the latest iteration of the movement following its conservation and pollution control phases. Starting in the late 1980s, Fred and ED have taken a contrarian position vis. other national environmental NGOs in embracing market-based approaches to pollution reduction/elimination, especially emissions credit trading (cap-and-trade) schemes of the kind pioneered in the 1990 federal Clean Air Act.

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